advertising market report 2016 eng

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Transparency International Georgia2016

http://transparency.ge

The project is implemented by Transparency International Georgia in the framework of The East-West ManagementInstitutes (EWMI) Advancing CSO Capacities and Engaging Society for Sustainability (ACCESS) project, fundedby United States Agency for International Development (USAID). The report is made possible by the support of theAmerican people through the United States Agency for International Development (USAID). The content of this reportis the sole responsibility of Transparency International Georgia and does not necessarily reect the views of USAID,

the United States Government, or EWMI.


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CONTENTS

Key ndings

Why the advertising market matters

New regulation

Radio

TV

TV audience measurement

Georgian Public Broadcaster

Online

Social advertising

Political advertising

Financial transparency of broadcasters

Integrity in advertising

Questionable government advertising spending

Promoting tourism through shell companies

Paid editorial content

Outdoor Advertising

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5

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KEY FINDINGS

Advertising revenues of broadcasters saw a substantial decline in 2015. Commercial revenues reported by TVstations decreased by 33 percent, from USD 47.3 in 2014 to USD 32 million in 2015; advertising revenues ofradio stations dropped from USD 4.8 to 4.1 million.

While the downturn was caused by the difcult economic environment and the devaluation of the Lari, it wasfurther exacerbated by changes in broadcast regulation that came into force with short notice and reduced themaximum permitted minutes of commercials per hour.

Other new rules that for the rst time address product placement on TV and Radio will contribute toimproved protection of consumer rights. Now, paid elements in shows have to be marked and thus be recogniz-able for the audience and can no longer inuence the focus of a program.

The insufcient marking of paid articles and content, from the private sector as well as from government agencies,especially in print and online media, remains an important problem that should be tackled through self-regulationand improved professional and ethical standards for PR practitioners and media representatives.

That there are now two television audience measurement companies operating in Georgia, which is unlikely tobe a sustainable solution. The fact that the ratings produced by them differ substantially is likely to cause somecontinuing uncertainty.

In times of declining commercial revenues, government funding for the media has become an important sourceof nancing for some media outlets, including several local broadcasters. In several cases, TI Georgia found thatgovernment funding is allocated in a problematic manner by municipalities.

Similarly concerning is the fact that the National Tourism Association in recent months signed contracts to promote

Georgia as a tourism destination in Ukraine, Russia and Belarus worth USD 1.4 million with shell companies

that appear to have been set up specically for these contracts.

Recommendations

State bodies

The governmentshould ensure that any advertising and PR agreements with media outlets do not infringeon the editorial independence of the media. Government advertising must not encourage or require ethicallyand professionally problematic practices, including paid coverage of the government and the distribution ofpress releases as editorial content, without adequate markings. It is important to ensure transparent andnon-discriminatory distribution of any government spending for PR and advertising, especially in the monthsahead of the parliamentary elections.

When adopting legislative changes that have a substantial impact on the media, Parliamentshould

allow for sufcient time for the adopted changes to come into force, to allow stakeholders to prepare forthese changes and to avoid unnecessary disruptions in the media sector. Main stakeholders should beconsulted during the process.

The State Audit Ofceshould consider an audit of selected government bodies to establish if public fundsused for advertising activities are spent in a transparent, efcient and economical way.

The Georgian National Communications Commission (GNCC)should consider a monitoring effortfocusing on advertising and service contracts of State bodies with broadcasters, and their compliance withGeorgian legislation.

The Tbilisi City Courtshould nally come to a decision in the case concerning the disclosure of revenuesources of Georgian broadcasters to the GNCC.

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To the media and actors in the advertising sector

Media outletsshould adequately mark content that is paid and was not created under their full editorialindependence. Markings should be such that an average reader or viewer will be able to understand thata media outlet received payment or another form of compensation to publish content. Similarly, adequatemarkings should also be made when a report results from a free sample product, a tr ip or another form ofcontribution from a third actor that is related to a story.

Ideally, there should be an effort by PR professionalsto develop and implement ethics standards througha self-regulatory body. Professional standards should also include a commitment to refrain from usingunmarked advertorials and payments to media outlets in exchange for coverage.

There appears to be a continuing need for the development of skills of advertising professionalsin theprivate and also in the public sector, including in regards to the importance and usage of data when planningadvertising campaigns. Educational institutions and market actors should consider setting up a dedicatedtraining course for this profession.

WHY THE ADVERTISING MARKET MATTERS

A functioning advertising market is a crucial precondition for the development of a sustainable and pluralisticmedia sector, which in turn is a cornerstone of a robust system of democratic checks and balances.1Ahead ofthe October 2016 parliamentary elections, a diversied advertising sector is also an important factor to ensurefair access to platforms and media for all political parties and candidates.

In the past, Georgia suffered from a highly concentrated advertising sector and interference by actors with po-litical ties to the government at the time. The advertising sector was used to inuence advertising expenditureows and thus the overall development of the Georgian media, as a rst TI Georgia report on this topicdocumented in 2011.2A follow-up report in 2013 found that following the 2012 parliamentary elections andthe change of government, the political grip on the advertising and media markets loosened and the sectorbecame more pluralistic.3

TI Georgia has been shedding light on the individuals behind major media outlets for several years.4 A pluralisticmedia sector with media outlets that are not dependent on the nancial support of their owners is crucial toallow for reporting that can hold political leaders and the elite to account. As donor support for media outlets hasdeclined in recent years, and given that there is limited innovation in the Georgian media to encourage audiencesto pay for high-quality content, including online, advertising revenues are crucial for a sustainable media market.

This report seeks to take stock of developments in the advertising sector in recent years. It is based on morethan 20 background conversations with executives from media outlets, market research companies, advertisingagencies and marketing departments of major advertisers, donors and the Georgian National CommunicationsCommission (GNCC). It is also based on relevant data published by the GNCC and on data provided by com-panies that monitor media consumption in Georgia.

1 For a detailed assessment of Georgias system of checks and balances and key institutions, see TI Georgias National Integrity System(NIS) Assessment 2015, http://www.transparency.ge/en/node/53002

TI Georgia: The Georgian Advertising Market, December 2011, http://www.transparency.ge/en/post/report/georgian-advertising-market3TI Georgia: The Georgian Advertising Market Competition at Last?, June 2013, http://www.transparency.ge/en/advertising-market4See TI Georgia: Who Owns Georgias Media, October 2015, http://www.transparency.ge/en/node/5596 ;Who Owns Georgias Media, April 2014:

http://www.transparency.ge/sites/default/les/post_attachments/Who%20owns%20Georgias%20m edia,%2016%20April%202014_0.pdf 5


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Most important source of information

by age groups

TV Internet Neighbors,friends

Familymembers

Newspapers,newsmagazines

Other Dont know/ Refusedanswer

18-35 78% 13% 3% 2% 1% 0% 3%

36-55 91% 5% 2% 0% 0% 1% 0%

56+ 92% 2% 2% 1% 1% 0% 2%

Data collection: April 2015

Source:CRRC for NDI

Media consumption and advertising owTelevision remains the most important source of information in Georgia, with 98 percent of respondents in a2015 nationwide poll either naming it as the main (87 percent) or second most important (11 percent) way toreceive information.5

The Internet has become a leading source of information for about four out of ten people in Georgia 7 percentname it as their primary source, and another 30 percent as their second most important.

Newspapers and magazines are not mentioned by a large number of people as key sources of informa-

tion, and neither is radio. About 15 percent of respondents describe print media as their second most

important source of information, 3 percent attribute that role to radio.6

The distribution of adver tising spending also reects the powerful role of television. An estimated 73%

of gross advertising expenditure is estimated to go to television.7The key role of television is not unique to

Georgia. Both, Armenia and Azerbaijan, appear to have a somewhat similar distribution of advertising spending

by type of media.8

Second most important source of information

by age groups

Internet Neighbors,friends

Newspa-pers,magazines

Familymembers

TV Radio Colleagues Dontknow/Refusedanswer

18-35 43% 19% 5% 11% 15% 4% 1% 2%

36-55 32% 24% 18% 10% 10% 2% 3% 1%

56+ 9% 32% 24% 21% 6% 4% 2% 1%

Data collection: April 2015

Source:CRRC for NDI

5Caucasus Research Resource Centers (CRRC) NDI: Public attitudes in Georgia, April 2015,http://caucasusbarometer.org/en/na2015ge/INFSOU1/6

Caucasus Research Resource Centers (CRRC) NDI: Public attitudes in Georgia, April 2015,http://caucasusbarometer.org/en/na2015ge/INFSOU2/7Gross spending means that values are calculated based on price lists of media outlets and companies, not taking into account discounts,which are often substantial8Estimate provided by the agency ZenithOptimedia/Publicis Hepta in April 20166


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9 ZenithOptimedia: Executive summary: Advertising Expenditure Forecasts March 2016,http://www.zenithoptimedia.com/wp-content/uploads/2016/03/Adspend-forecasts-March-2016-executive- summary.pdf

Distribution of advertising spending in the South Caucasus

Estimate of media investments, 2015

TV Outdoor Digital Radio Print Cinema

Georgia

73% 11% 7% 5%

Armenia70% 12% 7% 18%

Azerbaijan

72% 10% 5% 9%

Source: ZenithOptimedia/Publicis Hepta

Share of global adspend by medium (%)

Television37.2

Cinema 0.60

Radio 6.60

Magazines 6.5

Outdoor 6.9

Mobile Internet 9.2

DesktopInternet20.20

Newspapers12.8

Estimate, March 2015

Source: ZenithOptimedia

In comparison with the distribution of advertising expenditures worldwide, online advertising, which attracts anestimated 30 percent of all advertising, remains small in Georgia.9

The sustainable development of online media is also undermined by the fact that a signicant share of onlinespending ows to Ireland where Facebook is incorporated and does not benet the development of local mediacompanies

Regional contextMost international advertisers, such as multinational corporations selling fast moving consumer goods, focuson the return they receive on their advertising spending. They often look at Georgia in a regional context andhave an advertising budget that covers several countries, allowing these companies to shift spending away fromone country and spend it in another if the expected return on investment to be much higher there.

In 2015, Ukraine, Kazakhstan, Belarus and Azerbaijan saw their advertising markets shrink. The impact of theeconomic crisis in Russia, the crisis in Ukraine and the collapse of the oil price caused local currencies to devaluesharply against the US dollar. In several countries in the region, including Azerbaijan and Armenia, advertisingis bought in local currency. In euro or dollar terms, the costs of placing ads decreased.

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In 2015, Parliament made several changes to broadcasting and advertising rules that had a signicant impacton the market.

Reduction of commercial breaksThe EU-Georgia Association Agreement, which was signed in mid-2014, requires Georgia to bring its

legislation in line with the Audiovisual Media Services Directive (AVMSD), which contains a set of common

rules for broadcasting in the European single market.13Georgia committed to complying within three

years.14The agreement grants only one exception: Georgia had ve years to implement Article 23 of the

AVMSD, which requires that the proportion of television advertising spots and teleshopping spots within

a given clock hour shall not exceed 20 percent (i.e. 12 minutes per hour).15

Despite the fact that Georgia had until 2019 to reduce the maximum allowed time allocated to commer-

cials, Parliament passed such a restriction of the maximum hourly advertising time in February 2015.16

The amendments came into force only a few weeks later, on April 1, 2015.

Rustavi 2s Executive Director, Nika Gvaramia, criticized the amendment at the time of the adoption as

an attack against his station. He warned that the new regulation would cause substantial losses because

it came into effect while TV stations had ongoing contracts with advertisers. 17The notion that political

considerations might have been a factor behind the fast reduction of the advertising time was also fueled

by Georgian Dream MP Gogi Topadze, who during the discussion of the amendment in Parliament said

that restrictions of Rustavi 2 were necessary because of its one-sided reporting over many years.18

Giorgi Bakhtadze, Imedis Director General, says that the recent changes in regulation are a positivechange, although parts of the changes strictly regulating sponsorship came a bit early. However, dening

NEW REGULATION

Georgia, however, saw what several advertising executives described as double-ination of advertising prices:Real advertising prices on national TV grew by more than 50% in 2015. This increase is a result of the fact thatadvertising is sold in dollars while companies do their business in Lari. Between October 2014 and December2015, the Lari had lost about 30% of its value against the dollar. 10 Prices on for national TV commercials haveincreased after available advertising inventory for commercials decreased due to changes in the law on broad-casting that limited the maximum time for ads to 12 minutes per hour.

In 2015, Georgias economy grew by (only) 2.8 percent, according to GeoStat. 11Because of the devaluation of

the Lari and a decline of remittances from abroad, most people had less money to spend.12

Many clients have Caucasus budgets. When they see that TV prices in one country are going up but sales arenot, they shift spending to other countries, one advertising agency executive told TI Georgia.

Many market observers TI Georgia spoke with agreed: the key factor that could drive more advertising spendingand thus increase the available funds for the media spending is overall economic growth and more money tospend in peoples pockets.

10In October 2014, one USD cost around 1.75 Lari, in December 2015 it was 2.4 Lari.11http://geostat.ge/index.php?action=0&lang=eng12Civil.ge: Remittances Down by 25% to USD, 1.08 bln in 2015, 15 January 2016, www.civil.ge/eng/article.php?id=2891413EU Commission, https://ec.europa.eu/digital-single-market/en/audiovisual-media-services-directive- avmsd14AVMSD, http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22014A0830(02)&from=EN15This limit does not apply to announcements made by a broadcaster in connection with its own programs, ancillary products directlyderived from those programmes, sponsorship announcements and product placements. Article 23, Audiovisual Media Services Directive,

http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32010L001316Amendments to Article 64 of the Law on Broadcasting, https://matsne.gov.ge/ka/document/view/2749425#DOCUMENT:117http://rustavi2.com/en/news/9056 , http://www.tabula.ge/ge/story/92340-gvaramia-kanonshi-cvlilebebi-rustavi-2-is-da-mediis-tsi-naaghmdegaa-mimartuli18http://rustavi2.com/en/news/90218


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what product placement is, what sponsoring is, what commercials are: all that will eventually lead us to

a more creative market.

The reduction of commercial time per hour was a necessary step the limit had been increased in 2005,

apparently in an effort to maximize the revenues of the then government-backed national TV channels.

However, the timing of the amendments and the short time between the adoption of the changes and the

amendments coming into effect had a substantial negative impact on the market and contributed to the

sharp fall in income of broadcast media in 2015.

The result of the reduction of available advertising inventory on national TV resulted in Rustavi 2 increasing

its price list prices by more than 20 percent.

Regional broadcasters had hoped that the reduction of inventory on Rustavi 2 and Imedi would result in

more advertising being allocated to smaller TV channels, including local stations. However, this so far

has turned out to be wishful thinking, also because only Rustavi 2 and Imedi TV can deliver the large

audiences that advertisers need to reach.

Because of the increase in prices on national television and changes in rules that apply to sponsorship

(see below), some smaller and medium-sized Georgina companies are no longer able to afford a presence

on national TV to promote their goods and services are smaller and medium-sized Georgian companies.

They are crowded out of the market, and are likely to focus more of their ad spending online, advertising

agency executives told TI Georgia.

Limits on sponsoring dealsIn January 2016, new rules for sponsorship came into effect. Now, sponsors can only appear with their

brand or company and endorse or promote a program. In line with the AVMSD, sponsorship messages

must not directly promote or encourage the purchase of particular goods or services. Before these amend-

ments came into effect, sponsorship messages were often used to encourage sales of a specic product.

Sponsorship deals had been an affordable way for also medium-sized companies with limited marketing

budgets to afford a presence on national TV, several marketing executives told TI Georgia. A number of

large companies with full brand awareness have also used sponsorship to encourage sales of specicproducts because this is no longer possible, sponsorship deals have lost much of their appeal.

Sponsorship had been a major source of revenue for several broadcast media outlets in recent years. In

2013, TV stations reported revenues of GEL 13.4 million (USD 8 million) from sponsorship agreements,

in 2014, this segment rose to GEL 18.2 million (USD 10.2 million). In 2015, revenues decreased to GEL

16.6 million (USD 7.3 million). In the rst quarter of 2016 sponsorship revenues amounted GEL 1.4

million (USD 0.57). In the same period of 2015 the revenues were GEL 4 million (USD 1.92). According

to GNCC data, reported sponsorship revenues of Rustavi 2 declined from GEL 2.1 million (USD 1.01

million) in the rst quarter of 2015 to GEL 789,130 (USD 324,000) in the same period of 2016; those of

Imedi from GEL 1.4 million (USD 0.67 million) to GEL 318,000 (USD 130,500). Maestros revenues also

fell by around GEL 90,000 (from GEL 294,000 to GEL 200,000, or from USD 142,000 to USD 82,000).19

Radio stations generated Gel 2.3 million (USD 1.3 million) in income from sponsorship in 2014, this

revenue remained at GEL 2.4 million (USD 1.1 million) in 2015. First quarter of 2016 (GEL 423,000, USD

174,000) also show slight increase compared to the same period of 2015 (GEL 345,000, USD 166,000).

A representative of Radio Fortuna Holding, the countrys largest radio broadcaster, told TI Georgia that

the changes also affected radio stations, where new regulation also resulted in decreased demand for

radio sponsorship agreements. In March 2016, the GNCC issued a written warning to Fortuna Media for

airing sponsorship messages on several of its channels

that directly called for the purchase of goods or services, thus violating the new regulation.20

19GNCC, http://analytics.gncc.ge/en/statistics/?c=broadcasting&f=revenue&exp=tv&sid=12099520http://www.gncc.ge/en/news/press-releases/komisiam-shps-radio-holding-fortunas-ar-daidardo-fortuna- fortuna-avtoradio-radioarxe-

bi-sheamowma.page 9


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Product placement: protecting consumersIn January 2016, new rules came into force that for the rst time regulate product placement in broadcast media.These changes reect the standards of the AVMSD and, if enforced in a fair and transparent manner, will hopefullycontribute to increased consumer protection as broadcasters should no longer be able to endorse and promotecompanies and products in their shows, without the audience being aware that these are paid placements.

The AVMSD states that any product placement that is surreptitious, i.e. that cannot be detected by consumers,should be prohibited because of its negative effect on consumers. When there is product placement in a show,that fact has to be highlighted, for example through a neutral logo.21The decisive criterion distinguishing spon-sorship from product placement is the fact that in product placement, the reference to a product is built into the

action of a programme, while the reference to a sponsor may be shown during a programme but not as partof the plot.22The AVMSD is also clear that product placement, as well as sponsorship, should be prohibitedwhere it inuences the content of programmes in such a way as to affect the responsibility and the editorialindependence of the media service provider.

Some of the principles of the AVMSD are reected in the Code of Conduct for Broadcasters, which was adoptedby the GNCC in 2009 and includes some aspects of consumer protection. The key problem with the Code isthat its provisions are not enforceable.

Consumers who feel that principles of the Code are violated cannot turn to the GNCC and its consumer ombuds-woman. Instead, they have to address the TV station itself with their complaint as part of a self-regulatoryapproach. There is no mechanism to appeal to the regulator or courts in cases where the TV station does not

satisfactorily address a concern.

In regards to advertising, the Code requires broadcasters to not mislead their audience and to maintain inde-pendent editorial control over program content without distortion of programs for commercial purposes.23

Monthly revenues from sponsorship: 2014 vs 2015

1,750,000

1,500,000

1,000,000

500,000

0

Converted into USD based on average monthly exchange rates

Source: GNCC

TV 2014 (USD)

TV 2015 (USD)

Radio 2014 (USD)

Radio 2015 (USD)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

21Article 90, AVMSD, http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32010L001322Article 91, AVMSD, http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32010L001323Article 57, Code of Conduct for Broadcasters, http://www.gncc.ge/les/7200_7176_124355_Codex88504_1_ENG.pdf10


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In recent years, these provisions have been dead law. There is excessive product placement on several majorTV channels that also appears to shape editorial content of specic programs, including morning shows andin some cases also the coverage of business news. For most viewers, this inuence on the editorial content inmany cases may not be apparent.

The GNCC has provided guidance to broadcasters on how to apply the new regulation, and has said that it willmonitor and enforce compliance after a grace period of a few months.

Addressing loud commercialsTo address a consumer rights issue, Member of Parliament Temur Maisuradze (Georgian Dream NationalForum) in February 2016 introduced amendments to the Law on Advertising to require broadcasters to maintaina constant sound volume, including during commercial breaks.25The MP later withdrew the proposal, and thereis a chance that the GNCC will issue technical guidelines on this matter.

According to the European Broadcasting Union (EBU), an alliance of 73 public service media organizationsfrom 56 countries, loudness inconsistencies between programs and between channels are one of the leading

causes of audience complaints. The EBU has issued recommendations to its members to ensure that perceivedvolume remains at a consistent level.26

The EUs Audiovisual Services Directive, which Georgia has committed to align its regulation with, does notaddress the sound level of broadcasts, it is left to individual countries to address. 27Bulgaria, Poland, the CzechRepublic, Italy, Germany and the United Kingdom are among the countries that have taken action and intro-duced rules that commercials must not appear louder than other programs.28Advertisements must not beexcessively noisy or strident, UK regulation on television commercials requires.29In the United States, theCommercial Advertisement Loudness Mitigation (CALM) Act, which came into force in 2012, establishes methodsto measure and control the audio loudness of digital programming, including commercials. 30

In markets without such regulation, advertisers may be tempted to compress the sound in commercials,

which will make them appear louder. The idea: even if viewers leave the room during a commercial break,they should still hear the advertisers messages. However, such practice may be bothersome to all those

who dont leave the room. Enforcing a common standard would thus provide protection to consumers.

Consumer protection aspects in the Code of Conduct for broadcasters:

No product or service shall be advertised in news programmes. (...) Broadcasters shall not promote

or endorse any product, organization or service. Any reference to a product, organization or servicein programmes shall be editorially justied. References to brand name, logo or price must be kept to aminimum. Broadcasters or their employees shall not accept any cash or gift in exchange for the promotionof a product or service.

The Code stresses that a clear separation of advertisement and programme is necessary to ensure editorial

independence and accountability to the audience. Broadcasters should not promote products and servicesin a misleading way or refer to them in programmes so that to create an impression of endorsement. 24

24Articles 58, 59, Code of Conduct for Broadcasters, http://www.gncc.ge/les/7200_7176_124355_Codex88504_1_ENG.pdf25http://37.131.231.12/le/1/BillReviewContent/111898?26https://tech.ebu.ch/docs/r/r128.pdf, http://www3.ebu.ch/about27See: http://www.europarl.europa.eu/RegData/commissions/peti/communication/2012/486010/PETI_CM(2012)486010_EN.pdf28Rayna, Nikolava: Bulgaria Agreement on Standard for Regulation of Loudness in Advertising,

http://merlin.obs.coe.int/iris/2013/4/article5.en.html; http://merlin.obs.coe.int/iris/2010/2/article29.en.html;http://www.etere.com/DocView/661/TVB_Europe__RAI.aspx; http://www.krrit.gov.pl/en/for-journalists/press-releases/news,1839,krrit-mon-

itors-advertisement-loudness.html;http://merlin.obs.coe.int/iris/2013/7/article8.en.html; http://www.theguardian.com/media/organgrinder/2008/may/07/noisyadsthereisnothing29https://www.asa.org.uk/Rulings/Adjudications/Display-Code.aspx?CodeId=%7B1729C7A4-C51F-4DEC-8295-B994DAE14967%7D&ItemId=%7B9D8873D2-FC75-4E79-A1C2-AD6797C23DD0%7D.30https://www.fcc.gov/media/policy/loud-commercials. 11


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Revenues of radio stations

Ad revenues includes advertising and sponsorship revenues

Ad revenues GEL Total revenues (GEL) Ad revenues USD Total revenues (USD)

2013 8.18m 9.37m 4.91m 5.63m

2014 8.53m 9.64m 4.81m 5.44m

2015 9.29m 13.23m 4.07m 5.81m

As reported to the GNCC in GEL, USD values based on monthly average exchange rates

Source:GNCC

There are more than 40 authorized radio broadcasters. 33 operators reported revenues to the Georgian Na-tional Communications Commission in the year 2015, several others reported no income and appear to be

non-operational.31

Radio stations reported GEL 9.3 million in revenues from commercials and sponsorship deals in 2015, up from

GEL 8.4 million the year before. It appears, however, that this increase was caused by the devaluation of theLari. Almost all radio advertising in Georgia is sold in U.S. dollars. A conversion of monthly reported revenuesshows a decline in advertising income in dollars, from USD 4.8 million in 2014 to 4.1 million in 2015. In the rstquarter of 2016, revenues from commercials and sponsorship remained decreased to USD 749 thousand, from843 thousand the year before. Looking at the same numbers in Lari, commercial revenues increased slightlyfrom GEL 1,75 million to 1.82 million in the rst quarter.

Total reported revenues of radio stations increased from GEL 9.6 million in 2014 to GEL 13.2 million in 2015.A major factor contributing to this increase was revenue of GEL 2.8 million from content production, generatedby the company Kortesi-Gidago. However, these activities are not directly related to the companys radio broad-casting activities, according to GNCC staff. If these revenues are excluded, total revenues in 2015 amounted toGEL 10.4 million (USD 4.6 million). [Chart #1]

Radio Fortuna Holding in 2015 reported GEL 5.2 million (USD 2.7 million) in revenues from commercials andsponsorship, receiving more than half of all radio advertising spending in Georgia. The group consists of RadioFortuna 106.9, Radio Fortuna Plus 103.4, Radio Ar Daidardo 96.7 in Tbilisi and Avtoradio 95.1 (Tbilisi). Morethan 12 percent of radio advertising spending, GEL 1.1 million (USD 580 thousand) go to Radio Imedi, whichis under the same ownership as Imedi TV.

Data from the past three years shows ups and downs in advertising revenues reported by individual stations.Notably, there are several operators that managed to signicantly grow their income from 2014 to 2015, includingin dollar terms.

RADIO

31The analytics portal of the GNCC in April 2016 listed 42 authorized radio broadcasters. Some of them, such as the Radio Fortunagroup, operate several radio stations. http://analytics.gncc.ge/en/statistics/?c=broadcasting&f=revenue&exp=radio&sid=12049212


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Advertising and sponsorship revenues of radio broadcasters

Top 20 radio broadcasters by advertising income

2013(GEL)

2014(GEL)

2015(GEL)

2013(USD)

2014(USD)

2015(USD)

Share2015(%)

Radio Holdingi Fortuna 4m 4.5m 5.2m 2.4m 2.6m 2.7m 56

Radio Imedi 1.2m 1.1m 1.1m 743.1k 620.7k 587k 12.3

Kartuli Radio 310k 526.8k 591.1k 186.9k 299.5k 304.5k 6.4

Media Tsentri Ghia Apkhazetistvis 526.7k 349k 495.2k 317.5k 198.4k 255.1k 5.3

Momavlis Reklama 237.4k 264.8k 420.3k 143.2k 150.5k 216.5k 4.5

Chveni Radio 0 74.5k 283k 0 42.4k 145.8k 3

Radio Kompania Pirveli Radio 323.7k 228.2k 202.7k 195.2k 129.7k 104.4k 2.2

Radiotsentri Plus 389.8k 299.1k 157.9k 235k 170k 81.3k 1.7

Evropa Plus-tbilisi 17.8k 71.9k 138.8k 10.7k 40.9k 71.5k 1.5

Radio Utsnobi 189.9k 165.7k 120.3k 114.5k 94.2k 62k 1.3

Starvizia 0 0 74k 0 0 38.1k 0.8

Kompania Mediastrimi 0 0 57.5k 0 0 29.6k 0.6

Samautsqeblo Kompania Hereti 26k 36.1k 49.5k 15.7k 20.5k 25.5k 0.5

Media Hausi Dekomi 38.6k 44.9k 45.4k 23.3k 25.5k 23.4k 0.5

Dzveli Kalaki 45.9k 63.5k 43.7k 27.7k 36.1k 22.5k 0.5

Asotsiatsia Atinati 23.3k 29.6k 41.2k 14k 16.8k 21.2k 0.4

Kortesi-gidago 43.8k 83k 39k 26.4k 47.2k 20.1k 0.4

Sistema Gama 21.2k 41.9k 29.3k 12.8k 23.8k 15.1k 0.3

Tele-radio Kompania Trialeti 45.9k 46.1k 28.5k 27.7k 26.2k 14.7k 0.3Kedi Studio 54.8k 101.2k 27.6k 33k 57.5k 14.2k 0.3

Total 8.2m 8.5m 9.3m 4.9m 4.9m 4.8m 100

GEL amounts based on monthly reports led by broadcasters with the GNCC, USD values calculated based

on monthly average exchange rates

Source:GNCC, TI Georgia Chart #1

A representative of Radio Fortuna Holding told TI Georgia that her company uses TNS audience data tomarket itself to advertisers and that the groups radios have a combined audience share of around 55 percent.

A company representative attributed most of the growth in Lari revenues to the weakening of the currency andtold TI Georgia that Fortuna Holding did not expect advertising revenues to increase in 2016, including becausepolitical campaigns have in the past made little use of radio advertising in their campaigns. Just over half ofRadio Fortuna Holdings advertisers are small and medium sized companies. About a quarter of commercialsis sold through sales houses; the rest is sold to directly to advertisers, according to a company representative.

Advertising agencies have limited interest in buying radio advertising for their clients, which would use radioonly to support a larger TV advertising campaign because the spending on radio and thus the commission forthe agency is relatively low in relation to the effort needed, TI Georgia learned from interviews with advertisingagency executives. Thus, radio stations also often sell commercials directly to advertisers, especially smalland medium size local companies.

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IPM Research monitored the commercials aired on eight radio stations in 2015, nding that these stations ran1,02 million commercials with a total duration of 18.8 million seconds and a price list price of USD 9 million.Based on price list prices (thus not reecting discounts), Radio Ar Daidardo (USD 2.24 million) attracted themost advertising revenue, ahead of Radio Fortuna (USD 1.99 million) and Radio Imedi (USD 1.45 million).32

There are no rules in the radio advertising market, Giorgi Abramishvili, the director of Market Intelligence Cau-casus TNS says. Many radio stations have been selling their commercials without any usage of data. That thispractice has resulted in several radio stations offering dumping prices and selling their airtime under value, for

as little as 5 GEL (USD 2) for a 30- second spot.

The number of radio stations has grown in recent years, including because the GNCC has for the rst timeawarded licenses to several community radio stations:33

Radio NOR received a community broadcasting license for Ninotsminda in early 2015, where it providesnews to the largely ethnic Armenian community34

The First-Called Georgian University of St. Andrew of the Patriarchy of Georgia received a license,allowing it to broadcast in large parts of the country in January 201635

The Center for Civic Activities received a license for Radio Way in January 2016, which covers the Pankisivalley36

AGFM caters to mainly Azeri communities, covering Marneuli, Bolnisi, Dmanisi and Tetritskaro as well asTbilisi, Rustavi and Gardabani37

Radio audience measurementSince 2013, Market Intelligence Caucasus TNS has conducted an ongoing radio audience survey. TNS rollsout radio audience survey data twice a year, current releases are based on approximately 1,280 interviews.38

The radio audience survey was launched with support from the USAID-funded GMedia project; donor support has

been gradually reduced.39TNS has conducted numerous trainings for radio marketing staff to understand howthey can use audience data to their advantage, according to Giorgi Abramishvili, the director of TNS. However,there has been limited interest from radio stations and agencies to buy the radio data. Abramishivli says that thecompany is considering to discontinue the survey after 2016 if there is no uptake in demand and a sustainablenancing model for the data collection is found.

Listening habits51 percent of the urban population (12 years and older), some 667 thousand people, listen to the radio for at leastve minutes per day, according to the TNS survey. On average, the time spent listening (TSL) is 333 minutesper day. About two out of three radio listeners do so in the car, approximately 16% listen on radio receivers,some 12% on their mobile phones.

There are two radio prime times in Georgia: one during the morning rush-hour between 9:00 and 10:00, whenlistening is especially high among car-owners. A second prime time is during the evening rush hour, between18:00 and 19:00.

32World of Marketing: Leading radio stations according to 2015 advertising monitoring. January 2016, http://wom.ge/?p=8052Surveydata collected by TNS in 2014 indicates that one out of two adults in urban areas listens at least 15 minutes to the radio on an averageday. The average time spent listening per day was 333 minutes, survey data from TNS collected in the second half of 2015 shows.33http://registry.gncc.ge/Licenses.aspx?LicTypeID=134 http://www.gncc.ge/en/news/press-releases/radio-tv-nor-nnle-has-obtained-community-radio- broadcasting-license-in-the-city-of-ni-notsminda.page; http://nor.ge/; http://registry.gncc.ge/Licenses.aspx?LicTypeID=135http://www.gncc.ge/en/news/press-releases/radiomauwyeblobis-licenziebis-gasacemad- gamocxadebul-konkursebshi-gamardjve-bulebi-gamovlinda.page36http://www.gncc.ge/en/news/press-releases/radiomauwyeblobis-licenziebis-gasacemad- gamocxadebul-konkursebshi-gamardjvebule-

bi-gamovlinda.page; http://radioway.ge/; http://activities.ge/en/detail/news/83/37http://agfm.ge/38The survey uses the Day After Recall method to measure listening habits of the urban population: On a daily basis people in citiesare interviewed via landline phones and asked about their radio consumption the day before, broken down into 15-minute intervals. Insmaller cities, TNS conducts face to face interviews, http://tns-global.ge/?p=355#.VxXEWOayNBc39TI Georgia was a grantee of the GMedia project and is currently a grantee of IREX and USAID.14


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More than 70 percent of all advertising expenditures in Georgia are estimated to go to television. 81authorized TV broadcasters led nancial reports with the broadcast regulator GNCC in 2015, 63 TV operatorsreported some kind of income and thus appeared to be operational. 40

Total reported revenues fell by 30 percent in U.S. dollar terms, from USD 53.3 in 2014 to 37.4 million in 2015.

Commercial revenues fell from USD 47.3 to USD 32 million. In Lari, the decline was less severe.

TV

Annual TV revenues

GEL amount based on private broadcasters monthly nancial disclosures with the Georgian National

Communications Commission

Ad revenues GEL Total revenues (GEL) Ad revenues USD Total revenues (USD)

2010 59.19m 70.56m 33.31m 39.71m

2011 64.8m 79.84m 38.68m 47.66m

2012 63.11m 82.61m 38.24m 50.07m

2013 66.04m 74.88m 39.59m 44.9m

2014 84.04m 94.61m 47.3m 53.29m

2015 72.59m 84.95m 31.95m 37.37m

Ad revenues iclude income from advertising and sponsorship; excl. Georgian Public Broadcaster; USDvalues based on monthly average exchange rates

Source:GNCC/TI Georgia

40http://analytics.gncc.ge/en/statistics/?c=broadcasting&f=revenue&exp=tv&sid=121852#

Two channels, Rustavi 2 and Imedi TV, continue to receive between 80 and 85 percent of all television adver-

tising revenues. The two broadcasters retain a combined audience market share of 45 to 50 percent, meaningthat almost ve out of ten minutes Georgians spend watching television, they watch either Rustavi 2 or Imedi.

From mid-2013 to mid-2014, Maestro had an average audience share of about 15 percent, including becauseof popular Turkish soaps. Its popularity decreased when other started showing similar dramas. Channel 1 ofthe Georgian Public Broadcaster has continuously lost audience share and now remains around three percent,which viewership peaks during popular sport events. Several entertainment-focused channels, including GDS,Comedy and Marao, consistently have an audience share of several percent each.

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Audience share of Georgian TV stations

35,0

20,0

10,0

0,0

Jan 2013 to Feb 2016

Source: TVMR GE

Rustavi2

Imedi

Maestro

New channel/Comedy

GDS

Channel1Marao

Channel2

Music Box

Maestro 24/TV11

Kavkasiya

Palitra TV

Tabula TV

01.01.13 01.05.13 01.09.13 01.01.14 01.05.14 01.09.14 01.01.15 01.05.15 01.09.15 01.02.16

Monthly average audience share in %

Rustavi 2 suffered a 38 percent decline in its commercial revenues, from approximately USD 25.1 million (GEL44.6 million) in 2014 to USD 15.7 million (GEL 35.5 million) in 2015. From March 2015 onward, commercialrevenues (in dollars) were below the performance of 2014, starting from September the gap widened further.41

Zurab Gumbaridze, the head of Intermedia, which sells Rustavi 2s advertising inventory, says that the limits onhourly advertising time resulted in revenues shifting from Rustavi 2 towards Imedi, adding that the Rustavi 2sproblems in the fall of 2015 were also caused by court actions taken against the ownership and managementof the channel, which caused some advertisers to refrain from booking ads on the channel, not knowing if thechannels assets would be conscated or frozen and if the station would remain operational.42

41Data according to revenues led with the GNCC, converted by TI Georgia into U.S. dollars, http://analytics.gncc.ge42See: Media Development Foundation: Media Freedom 2015, http://mdfgeorgia.ge/uploads//report-eng- nal-0503.pdf

Commercial revenues of Rustavi2 and Imedi TV (USD)

4,000,000

3,000,000

2,000,000

1,000,000

0

Reported revenues from advertising and sponsorship, as reported to the GNCC, converted to USD based on

monthly average exchange rates

Source: GNCC/TI Georgia

Rustavi 2 2014

Rustavi 2 2013

Imedi TV 2013

Imedi TV 2014

Imedi TV 2015

Rustavi 2 2016

Rustavi 2 2015

Imedi TV 2016


16


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In October and December 2015, Imedi reported higher commercial revenues than Rustavi 2. This is the rsttime in the last few years when Rustavi 2 lost the leading position. Imedi TV increased its revenues in Lari, andsuffered less of a decline in U.S. dollars terms, from approximately USD 12.5 million (GEL 22.2 million) in2014 to USD 10.6 million (GEL 24.2 million) in 2015.

Maestro TV suffered a 60 percent decline in commercial revenues, from USD 5.9 to 2.3 million; GDS reported adecline from USD 1 million to .76 million. Several smaller and newly established broadcasters, however, managedto grow their commercial revenues.

Commercial revenues of Georgian TV channels

Income from advertising and sponsorship of top 20 broadcasters

2013GEL

2014GEL

2015GEL

2013USD

2014USD

2015USD

Share oftotal adrevenues2015 (%)

Rustavi 2 (incl Comedy, Marao) 36.1m 44.6m 35.6m 21.6m 25.1m 15.7m 48.9m

Imedi TV 19.1m 22.2m 24.2m 11.4m 12.5m 10.6m 34.4

Maestro 5.7m 10.4m 5.1m 3.4m 5.9m 2.3m 6.8

GDS 728.2k 1.8m 1.7m 432.2k 1m 760.5k 2.3

Sakartvelos Media Kseli 0 433.9k 1.1m 0 244.5k 496.7k 1.5

Iberia-TV 0 141.9k 747.5k 0 79.3k 326k 1

Obiektivi 21.6k 418k 553.6k 12.8k 236k 241.1k 0.7

Artarea TV 2.0 0 14k 227k 0 7.6k 184.6k 0.6

Kavkasia 356k 537.1k 383.2k 214.2k 302.8k 169.5k 0.5

Telekompania Tbilisi 328.7k 359.5k 351.2k 197.6k 204k 154.2k 0.5

TV 25 118.6k 158.9k 228.6k 71.1k 89.7k 100.1k 0.3Kvemo Kartli TV 89.3k 252.7k 216.8k 53.3k 143.3k 96.7k 0.3

Ertsulovneba 60.8k 109k 197.2k 36.5k 61.4k 88k 0.3

Rioni 161.1k 279.4k 183.8k 97.1k 157.9k 81.4k 0.2

Trialeti 193.1k 324.5k 168.1k 116.3k 183.7k 74.1k 0.2

Palitra TV 27.3k 88.1k 121k 16.4k 50k 52.6k 0.2

Khariskhis Arkhi 15.2k 4.3k 116.4k 9.1k 2.4k 50.4k 0.2

Pirveli 0 4.3k 113.6k 0 2.3k 48.6k 0.1

Tabula TV 343.3k 303.7k 107.8k 206.9k 173k 46.8k 0.1

Gurjaani 55.7k 92.1k 95.1k 33.5k 51.7k 41.4k 0.1Total 66m 84m 75.2m 39.6m 47.3m 33.1m 100

Does not include Georgian Public Broadcaster; USD values calculated based on average monthly exchange

rates. Total amount also includes data from smaller companies not listed here

Source:GNCC/TI Georgia

A comparison of monthly total revenues of private TV companies highlights how bad of a year 2015 was, especially

when looking at it in dollar values. A recovery of the Lari-Dollar exchange rate may help to improve the situationin 2016, as advertising would then effectively become more affordable for local companies compared to last year.

In the rst quarter of 2016, as the Lari started to recover, TV revenues remained below 2015 levels: From Januaryto March of this year, TV stations reported total revenues of GEL 17 million (USD 7 million), compared with GEL18.9 million (USD 9.1 million) in 2015. 17


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Monthly total TV revenues (GEL)

Financial reports are led in Georgian Lari (GEL), TV channels sell advertising in US-Dollar (USD). Does not

include data for the Georgian Public Broadcaster.

Source: GNCC

2014

2013

2015

2012

2016

Based on broadcasters monthly nancial disclosures led with the GNCC


13,958,524.34

10,000,000

5,000,000

0

From a monopoly to a sales house duopolyRustavi 2 and Imedi TV continue to receive the lions share of advertising revenue, 48.9 and 34.4 percent oftotal television advertising revenues in 2015, respectively.

In 2016, there is now a duopoly in the TV market. Intermedia LLC is the exclusive sales house of Rustavi 2 andits sister channels Comedy and Marao, and also sells parts of the advertising inventory of Kavkasia and Pirveli ona non-exclusive basis.43On the other side, Imedi sells not only its inventory but also those of GDS and Maestro.

In late 2015, Maestro was in talks about a marketing contract with both, Intermedia and Imedi, with the latterending up winning the rights to market the third largest channel.

The uncertainty about who would market Maestro as well as the establishment of a new TAM company (see nextchapter) caused uncertainty in the market, resulting in several major advertisers to postpone the conrmation oftheir annual budgets for 2016 from January to March, an agency executive told TI Georgia. A reported decreaseof total revenues by TV broadcasters in the rst quarter of 2016 appears to conrm that the year did not start well.

Both sides, Imedi, and Intermedia, have a market power in terms of the combined audience reach of the chan-nels sold by them, that make it de facto difcult for advertisers who want to a national advertising campaignto completely bypass either of them. Close to 95 percent of all TV advertising expenditures go through eitherImedi or Intermedia.

Until 2013, there had been a de facto monopoly advertising sales house for national TV. Since 2010, GeneralMedia had exclusively sold Rustavi 2, Imedi and several other Tbilisi-based channels. After the sale of ImediTV for three symbolic Lari to its legitimate owners, the monopoly sales house ceased to exist.44

43Intermedia was founded in December 2012, its Executive Director, Zurab Gumbaridze, holds 50% of shares; 20% are held by MariamKarseladze; 15% each by Konstatinte Batmandi (Head of Sales at Rustavi 2) and Giorgi Khaburzania (Head of International Projects atRustavi 2), https://enreg.reestri.gov.ge/main.php?c=mortgage&m=get_output_by_id&scandoc_id=481640&app_id=55749744http://civil.ge/eng/article.php?id=25370; http://www.media.ge/en/portal/news/301503/18


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45http://www.tvmr.ge/#!en/company46Kantar is the research subsidiary of WPP, a global advertising and communications rm that is listed on the London Stock Exchangeand the NASDAQ in New York, http://www.kantarmedia.com;https://www.wpp.com/wpp/companies/kantar-media/; https://www.wpp.com/wpp/investor/shareprice/.47American Marketing Association: AMA Dictionary, https://www.ama.org/resources/Pages/Dictionary.aspx?dLetter=G&dLetter=G48 http://www.nielsen-admosphere.eu/about-us/company/.

TV ratings are at the core of a well-functioning television market. Since January 2016, there are now two tele-vision audience measurement (TAM) companies operating in Georgia: TV MR GE holds a license from ABGNielsen and has conducted TAM since 2005.45It now competes with Tri Media Intelligence, which is a licenseeof Kantar Media.46

Most advertising on national TV in Georgia is sold based on gross rating points (GRPs). Especially internationaladvertisers, such as major producers of consumer goods, only advertise when the reach of their expenditurescan be measured and veried. TAM companies electronically measure TV audiences based on a representa -tive panel of households and calculate how many people watch which programs, and what their demographicand household characteristics are. These ratings serve as the currency of the television market: The larger themeasured audience of a program is, the more GRPs a TV channel can sell to advertisers.

In 2014, several TV and advertising executives met to discuss the television audience measurement process andthe data provided by TV MR GE. The whole market got together. The vast majority was unhappy, says GiorgiBakhtadze, Imedis Director General. Following the meeting, Bakhtadze says, he identied MediaResearch, a

Czech company that was entering the Armenian TAM market at the time, as a potential new operator for Georgiaand invited the company to do a presentation in Tbilisi. A fbaew months after this presentation to potential clientstook place, MediaResearch was acquired by Nielsen and became Nielsen Admosphere.48Georgianmarket actors did not continue negotiations with the company.

After the acquisition by Nielsen, the company would not have been able to operate in Georgia due to a

non-competition clause, according to TV MR GE head Nino Gogoladze.

TV AUDIENCE MEASUREMENT

A gross rating point (GRP)can be dened as a measure of the total amount of the advertising exposuresproduced by a specic media vehicle or a media schedule during a specic period of time. It is expressed

in terms of the rating of a specic media vehicle (if only one is being used) or the sum of all the ratings ofthe vehicles included in a media schedule. It includes any audience duplication and is equal to thereach of a media schedule multiplied by the average frequency of the schedule.47

GRPs = Reach (%) x Average frequency (#)

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Tri Media IntelligenceWith the beginning of 2016, Tri Media Intelligence (TMI) launched operations as Georgias second TAM company.TMI is a licensee of Kantar Media, which also provides the people meters, software and other technologyneeded for the rating measurement.49TMI was registered in October 2014 and is jointly owned by MerabPachulia, who owns the polling and market research company Gorbi, and Giorgi Tevdorashivli, who owns sharesin several media outlets that are part of the Palitra media group, which he had co-founded with his brother Irakli.Palitra media also operates a small television channel, Palitra TV, of which Irakli but not Giorgi Tevdorashivli isa shareholder.

Following an establishment survey of 6,000 households that was implemented by Gorbi, TMI now has a panelof around 600 people meter households, covering all cities with more than 45,000 inhabitants Tbilisi, Kutaisi,Batumi, Zugdidi and Gori as well as Poti. TMIs Director, Tsotne Mirtskhulava, told TI Georgia that the surveywas based on questionnaires developed by Kantar, and that no questions regarding viewing habits or politicalpreferences were asked. To ensure independent quality control, Kantar has live access and veries data fromhouseholds, which is transmitted every night through mobile phone networks, before the data is shared withTMIs clients, according to Mirtskhulava.

In March 2016, TMI said it was measuring 27 Georgian channels and would expand this number to 60 in thespring of 2016, to include several local Georgian channels as well as international programs in its ratings.

TMI in March 2016 had 15 subscribing TV channels buying its data, including Imedi, GDS, Maestro, the Geor-gian Public Broadcaster (Channel 1, Channel 2, Adjara), Palitra TV, Obiektivi, TV Pirveli, Silk, Starvision andEnkibeniki, as well as approximately ten advertising agencies, according to the companys director. TV MR GEmaintains contracts with Rustavi 2 and its two sister channels Comedy and Marao, as well as with Kavkasia TV,Tabula TV, TV Pirveli and Music Box, and several advertising agencies.50

49Kantar is the research subsidiary of WPP, a global advertising and communications rm that is listed on the London Stock Exchangeand the NASDAQ in New York, http://www.kantarmedia.com; https://www.wpp.com/wpp/companies/kantar-media/;

https://www.wpp.com/wpp/investor/shareprice/.50http://www.tvmr.ge/#!en/tv_channels, http://www.tvmr.ge/#!en/ad_agencies_and_media_sellers51

TI Georgia: Ministry of Finance should not limit companys ability to measure TV ratings, 8 March 2014,http://www.transparency.ge/en/post/general-announcement/ministry-nance-should-not-limit-company-s- ability-measure-tv-ratings52TI Georgia: Revenue Service has started ning TV ratings rm for refusal to reveal partner households, 24 March 2014, http://www.transparency.ge/en/post/general-announcement/revenue-service-has-started- ning-tv-ratings-rm-refusal-reveal-partner-households.53http://www.civil.ge/eng/article.php?id=27052

Background: the 2014 tax audit of TV MR GEThe Ministry of Finances Revenue Service (RS) in February 2014 launched a tax audit of TV MR GE, atthe time the only company measuring TV audiences. TV MR GEs taxes had already been audited the

previous year. This time, the tax investigators insisted on checking all of the TAM companys assets,including the so-called people meters, which the investigators claimed was part of the stocktaking of thecompanys inventory. The people meters are installed in several hundred households and record a fam-ilys TV consumption. The auditors requested TV MR GE to provide them with all addresses of familiesthat were part of the audience measurement sample. Because any disclosure of this information wouldundermine the credibility of the data collection due to a r isk of outside interference or self-censorship ofthe participating families, TV MR GE refused to provide these details and was taken to court.51

TI Georgia at the time criticized the reasoning of the Revenue Service for trying to obtain the identities ofthe families with people meters, and questioned the motivation behind this audit.52The release of the datathe RS had requested would have effectively resulted in a several months-long shutdown of the companyand would have undermined the functioning of the television advertising market, ve TV channels and

more than a dozen advertising agencies warned at the time.53

TV MR GE was ned about GEL 2,000 for failure to cooperate with the investigators after it did not providethe household addresses. The companys director, Nino Gogoladze, told TI Georgia that the company losta court case challenging these nes but has appealed against this decision.

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The GPBs audience measurement tenderThe Georgian Public Broadcaster annually procures TAM services. In the tender to cover services for the year2015, the GPB had required a sample of 330 people meter households and a household survey ten times thesize of that panel and an international audit of the methodology.54In November 2015, the GPB announced thenew tender to procure TAM services for 2016, this time requiring that the successful provider would have asample of at least 400 households with people meters, and had conducted a baseline survey with a sample ofat least 4.000 households a surprising move, given that TV MR GE had a smaller than the required sample,and that TMI was at the time not operational yet. Also, the GPB for 2016 did not require an international audit,which it had required for 2015.55

Nino Gogoladze, the director of TV MR GE, told TI Georgia that at the time the GPB announced its TAM tenderin 2015, her company was working to increase the size of its household sample but had not publicly announcedthese plans. Representatives of the GPB told TI Georgia that they were aware that TV MR GE was increasing itspanel size when the tender was announced and that it was designed to not discriminate against any company.

Because TV MR GE increased its panel, the company was able to bid on the contract, as did Tri Media Intelli-gence, which won the contract with a bid of GEL 113,508. In 2014, the GPB had paid GEL 92,000 for TV MRGEs TAM services; in 2015, it raised the starting price of the reverse auction to GEL 120,000. 56

In February, the GPB launched several new programs. In late February, the GPBs Channel 1 only showed amarket share of around two percent in TMIs data. Interlocutors at the GPB expressed their disappointment withthese ratings and said there were discussing the possibility of asking for an independent audit of the TMIs panel.Ratings are not the top priority for the GPB, Tinatin Berdzenishvili, the GPBs Multimedia Director, said: We arenot selling GRPs. Our focus is on ROS the return on society.

Comparison of ratingsA comparison of average weekly audience shares data from TV MR GE and Tri Media Intelligence (TMI) for therst eight weeks of 2016 shows that while trends appear to be reected in the ratings of both TAM providers,there are stark differences in the two ratings.57

54 https://tenders.procurement.gov.ge/public/?go=130853;

https://tenders.procurement.gov.ge/engine/les.php?mode=app&le=961582&code=141691535755 https://tenders.procurement.gov.ge/public/?go=16922756 https://tenders.procurement.gov.ge/public/?go=169227, https://tenders.procurement.gov.ge/public/?go=13085357TI Georgia would like to thank both companies for providing audience data to TI Georgia upon request. Weekly audience share databy TV MR GE is accessible on the companys website, http://www.tvmr.ge/

Average weekly audience share: Rustavi 2, Imedi

Average weekly data for January and February 2016

Source: TVMR GE; Tri Media Intelligence

Rustavi 2 - TV MR GE

Imedi - TMI

Rustavi 2 TMI

Imedi - TV MR GE

Share in % measured by TV MR GE and Tri Media Intell igence (TMI)

01.Jan 02.Jan 03.Jan 04.Jan 01.Feb 02.Feb 03.Feb 04.Feb

30

25

20

15

21


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TVMR GE vs TMI - weekly average audience share (Jan, Feb 2016)Rustavi 2-TVMR

Rustavi 2-TMI

Imedi -TVMR

Imedi -TMI

Maestro -TVMR

Maestro -TMI

GDS -TVMR

GDS - TMI Channel1- TVMR

Channel1- TMI

1.Jan 26% 21% 22% 25% 6% 5% 6% 4% 5% 2%

2.Jan 26% 22% 23% 26% 5% 5% 4% 3% 3% 2%

3.Jan 26% 22% 25% 27% 6% 4% 4% 3% 2% 2%

4.Jan 26% 22% 23% 25% 6% 5% 4% 3% 2% 2%

1.Feb 26% 23% 21% 25% 8% 5% 4% 3% 2% 2%

2.Feb 27% 22% 20% 25% 9% 6% 4% 3% 3% 2%

3.Feb 27% 24% 22% 26% 8% 6% 4% 3% 3% 2%

4.Feb 28% 24% 23% 25% 6% 5% 4% 3% 3% 2%

Source:TVMR GE, Tri Media Intelligence

Data from TV MR GE showed Rustavi 2 as the most popular channel, with an average audience share of 26.25percent over those eight weeks, ahead of Imedi with an average share of 22.31 percent.

TMA data from Tri Media Intelligence shows Imedi as the most popular channel, with an average share of 25.5percent, ahead of Rustavi 2 with an average share of 22.3 percent. Rustavi 2s audience share is, on average,four percent higher in TV MR GEs data than it is compared with that of TMI. The latter shows an average audi-ence share of Imedi that is 3.2 percent above the ratings of TV MR GE.

Maestro, which since 2016 has its advertising inventory sold by Imedi, had, on average, a 1.8 percent highermarket share with TV MR GE than with TMI in the rst eight weeks of 2016. Rustavi 2s sister channels Comedyand Marao had a slightly higher audience share with TMI than with TV MR GE; GDS consistently had a loweraudience share in the TMI ratings, as did the GPBs Channel 1 and Channel 2.

The impact of two TAM companiesAdvertisers that want to advertise on Imedi, and the other channels it sells, had to become customers of TMI.The fact that advertising agencies now have to subscribe to the services of two TAM companies has createdsignicant additional costs to them. Some advertising executives that TI Georgia spoke with also highlighted thatthe existence of two currencies creates a difcult situation, which is at times hard to communicate to advertisers.

Are two rating measurement companies sustainable?It is likely that in the mid-term, only one TAM company will be able to sustain operations in the Georgian market,which is too small to support the costs of two separate companies carrying out the costly collection of marketdata. In most European markets, there is one TAM operator.

One exception to this rule is Bulgaria. There, two TAM companies Mediaresarch, which was acquired by Nielsen,

and GfK Audience Research Bulgaria (GARB) have been locked in a market battle. 58 Both have carried outparallel people meter monitoring, both have undergone international audits and both have contracts with the twolargest TV stations. But they provide contradicting results. 59Having two currencies on the market that attributedifferent values to the same product may undermine the development and proper functioning of the advertisingmarket.60The IREX 2015 Media Sustainability Index for Bulgaria concludes: The lack of reliable broadcast ratingmeasurement affects also the ability of media organizations to use market research to formulate strategic plans,enhance advertising revenue, and tailor the product to the needs and interests of the audience. 61

58

IREX Media Sustainability Index 2016: Bulgaria, p. 50, https://www.irex.org/sites/default/les/u105/EE_MSI_2016_Bulgaria.pdf59IREX Media Sustainability Index 2015: Bulgaria, p. 40, https://www.irex.org/sites/default/les/2015-msi- bulgaria.pdf60See: Evgeniya Scherer: Public service broadcaster BNTs invitation to tender for audience data research deemed lawful. IRIS 2014-9:1/11, http://merlin.obs.coe.int/iris/2014/9/article11.en.html61IREX Media Sustainability Index 2015: Bulgaria, p. 40, https://www.irex.org/sites/default/les/2015-msi- bulgaria.pdf22


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In Georgia, there has often been distrust towards actors who produce ratings and market data and allegationsabout biases and awed methodologies. At the core of the controversies around audience data collection inGeorgia is the fact that there are no industrial committees in the media sector. An industrial committee wouldprovide a forum for all relevant stakeholders to agree on a commonly accepted standards and methodologiesand procure data collection from a single source, whereby the costs are split fairly among market actors. It wouldinclude all TV channels, advertising agencies and other relevant stakeholders, and agree on a single mechanismto measure audiences.

Largest TV advertisersAmong the largest TV advertisers in 2015 are several multinational companies selling consumer goods,

food, snacks, and beverages.62The list also includes countrys largest mobile phone operators and two

local producers of beverages, Natakhtari, and Borjomi. Notably, the list contains also two micro-credit

providers, in addition to three commercial banks.

Several micro-credit companies advertise free and easy loans in their commercials and do not mention

at all that in case of late payments, customers have to pay effective annual interest rates of more than

400 percent, in some cases even more than 700 percent, depending on the provider.

The following companies were the largest TV advertisers in 2015, based on gross spending:

62Ranking of companies provided by TV MR GE. The list reects TV advertising spending based on price-list prices and does not reectdiscounts advertisers receive. The data also does not reect expenditure for sponsorship deals and product placement.

1 Mondelez (formerly: Kraft) Food, snacks, coffee (Milka, Jacobs)

2 Procter & Gamble Consumer goods ("Gillette", Head & Shoulders etc.)

3 Mobitel Mobile communication (Beeline)

4 Coca-Cola Beverages

5 Unilever Consumer goods, food

6 Magti GSM Mobile communication

7 Berlin-Chemie Pharmaceuticals

8 Geocell Mobile communication

9 Bank of Georgia Banking

10 IDS Borjomi Beverages Water ("Borjomi", "Likani", "Bakuriani")

11 Schwarzkopf Consumer goods

12 Elit Electronics Retail

13 Net Credit Micro-credits

14 Pepsico Beverages, snacks

15 Reckitt Benckiser Consumer goods

16 Wimm Bill Dann Sakartvelo Dairy products

17 Ludsakharshi Natakhtari Beverages ("Natakhtari", "Mtieli", "Kaiser", "Efes")

18 Saqartvelos Kinoteatrebi Movie theaters

19 PSP Pharmacies, pharmaceuticals

20 Iberia Refreshment Beverages (Pepsi)

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21 4Finance Micro-credits

22 Henkel Consumer goods

23 Nestle Food, snacks

24 Technoboom Retail electronics

25 Liberty Bank Banking

26 TBC Bank Banking

27 Danone Dairy products

28 Ferrero Sweets ("Kinder", "Nutella", Rocher")

29 Johnson & Johnson Consumer goods

30 M2 Real estate

The Georgian Public Broadcaster (GPB) operates three TV channels TV1, TV2, and Adjara TV and two radiostations, Radio 1 and 2. It has a full-time staff of around 180 people.63The public broadcaster recently developeda new strategy, has launched several new programs and is implementing structural and organizational changes.

In recent years, more than 90 percent of the GPBs revenues come from public funding, which is pegged to thecountrys total economic output. The GPB is entitled to receive at least the equivalent of 0.14% of the previousyears gross domestic product (GDP).64In 2015, it received GEL 40.82 million, according to preliminary budgetnumbers.65Public funding for 2016 is scheduled to increase by eight percent to GEL 44.1 million, equal toapproximately GEL 10.9 per inhabitant in 2015 and GEL 11.8 in 2016.66

GEORGIAN PUBLIC BROADCASTER

63The national budget for 2016 indicates 184 employees, http://www.mof.ge/images/File/biujetis- kanoni2016/kanoni/TAVI_VI.pdf64

Georgian Law on Broadcasting, Article 33(5). Preliminary data from GeoStat put Georgias 2015 GDP at GEL 31.7 billion,http://geostat.ge/index.php?action=page&p_id=119&lang=eng.65The GPBs annual report that contains its audited nances for 2015 was not available yet at the time this report was nalized.66GeoStat puts Georgias population at 3.7295 million people as of January 2015, http://geostat.ge/index.php?action=0&lang=eng;National budget for 2016: http://www.mof.ge/images/File/biujetis-kanoni2016/kanoni/TAVI_VI.pdf

Revenues of the Georgian Public Broadcaster (GPB)

Public Funding(GEL)

Commercialrevenues (GEL)

Other revenues(GEL)

Total revenues(GEL)

Commercialrevenues (% oftotal)

2012 50.6m 5.97m 0 56.57m 10.55

2013 33.73m 481.6km 1.49m 35.71m 1.35

2014 32.49m 2.8m 1.32m 36.61m 7.66

2015 40.82m 712k 0 41.53m 1.71

2016 44.1m 1.75m 0 45.85m 3.82

2015: data is preliminary, the GPBs ofcial annual report was not available at the time this report wasnalized, thus lacking data for other revenues. 2016 public funding according to the national budget,

commercial revenues are a goal stated by GPB staff.

Source:GPB/TI Georgia

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67Article 64 (1), Law on Broadcasting, https://matsne.gov.ge/ka/document/view/32866.

2015 amendments: https://matsne.gov.ge/ka/document/view/2749425#DOCUMENT:168According to data provided by the GPB, it received GEL 149,046 plus USD 1,526,900 in ad revenues in 2014 and GEL 109,392 plusUSD 262,679 in ad revenues in 2015. Final, audited data for 2015 was not available yet as this report was nalized. Sales staff of theGPB told TI Georgia that they expect commercial revenues of approximately USD 750,000 in 2016 from advertising and sponsoring deals.69A recording of the program is available on the GPBs YouTube channel: https://www.youtube.com/watch?v=-Ve-9p2YK0M

Restrictions to earn commercial incomeThe Parliament limited the GPBs ability to receive commercial revenues in February 2015, amendments to

the Law on Broadcasting entered into force on April 1, 2015. The GPB is now only allowed to air commercialsand sponsoring messages around the coverage of sports events, of international festivals and competitions(such as the Eurovision Song Contest). Commercial advertising is limited to six minutes per hour and 30minutes per day.67

GPB marketing executives told TI Georgia that new sponsorship regulation had caused the need for numerousrequests for clarications from the Georgian National Communications Commission on how new rules onsponsorship and product placement had to be interpreted and applied. To become better, we need more funds,Tinatin Berdzenishvili, the GPBs Multimedia Director says.

The GPB is allowed to air product placement only in entertainment shows but is not allowed to emphasize aproduct which may only be shown as part of the natural ow of content, and must not be mentioned.

Georgian Public Broadcaster

800,000

600,000

400,000

200,000

0

Some revenues are accounted for in GEL, most in USD.

Source: Georgian Public Broadcaster (GPB)

USD

GEL

2014 Apr Jul Oct 2015 Apr Jul Oct

Monthly averages from advertising and sponsorship (TV and radio)

In 2015, the GPB earned approximately GEL 700 thousand in commercial revenues, a substantial decline from2015, when revenues from advertising and sponsorship accounted to GEL 2.8 million.68However, the steepdecline may at least partially be related to the fact that there neither Olympics nor an important internationalfootball championship in 2015. The GPB hopes for approximately USD 750,000 (GEL 1.5 million) in commercialrevenues in 2016, according to its marketing and sales team. This income will mostly be generated around twomajor sports events for which the GPB holds broadcasting rights: The 2016 UEFA Euro football championship(June and July) and the Summer Olympics (August).

The GPB has engaged in sometimes ethically questionable practices to increase commercial revenues. AJanuary 2015 show, which starred two children and was apparently also targeted at minors, displayed the logoof a betting and gambling website in the background of the set throughout the program.69This practice, whichis now banned, appears to not have conicted with the law as it applied at the time, but likely violated the GPBsin-house Code of Conduct, which prohibits product placements. It is unclear to what extent this Code of Conductis promoted and applied at this point Berdzenishvili told TI Georgia that after organizational reforms and staffchanges are nalized, the GPB is planning to have a series of staff trainings, including on ethics.

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Online presenceThe GPB has recently re-launched its website.70The public broadcasters online content mainlyconsists of segments of TV news and other broadcasts.

There are lessons to be learned by the GPB on how to increase its relevance and audiences online. A 2016report by the Reuters Institute, entitled Public Service News and Digital Media, details how some Europeanpublic service broadcasters, namely those of the United Kingdom and Finland, have managed to thrive online,while in several other countries signicantly more people get news online from social media than from publicservice media:71

In the UK, the BBC reaches 72 of the population with its TV newscasts in an average week and 48 percent

of the population online. In Finland, the public broadcaster Yle has a daily TV audience market share of 44 percent and also reaches

39 percent of the population with its news online. In Poland, the public broadcaster as a weekly TV news reach of 58 percent of the population, and an online

news reach of 20 percent.

Tinatin Berdzenishvili, the GPBs Multimedia Director, says that the broadcaster, which is currently going throughan organizational restructuring process, is adopting a mobile rst strategy. Some of its programs already reachlarger audiences online than they do through broadcast, according to Berdzenishvili.

70

http://gpb.ge71Reuters Institute: Public Service News and Digital Media, March 2016,http://reutersinstitute.politics.ox.ac.uk/sites/default/les/Public%20Service%20News%20and%20Digital%20Media.pdf;Niemanlab: In the U.K. and Finland, public media is thriving on digital; in other European countries, not so much,http://www.niemanlab.org/2016/03/in-the-u-k-and-nland-public-media-is-thriving- on-digital-in-other-european-countries-not-so-much26


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The GPB could use its online presence to attract some additional commercial income through Internet advertising.

The broadcasting law does not impose any restrictions on the GPBs online activities and its ability to generatecommercial revenues by monetizing its content online. However, the GPBs sales team argues that the lack

of any regulation on its online activities leaves the GPB in a limbo in regards to monetizing its content online.

The GPB has acquired the rights for U.S. shows including Downtown Abbey and House of Cards. However,local commercial websites have made available pirated the dubbed episodes aired by the GPB and the publicbroadcaster is now ghting these providers, according to GPB staff. The private station GDS, which has also

acquired rights to air various famous U.S. series in Georgia, was confronted with a similar problem and hadpirated content removed fromGeorgian websites.72

Regional broadcastersDonor funding available for regional broadcasters appears to have declined in recent years, as resources allocated

to Georgia have decreased and priorities have shifted. In 2015, regional broadcasters had to switch from analogto digital terrestrial broadcasting. After this transition, 25 local TV stations appear to remain on air (not countingTbilisi-based channels). Total reported revenues by these local channels decreased from GEL 3.3 million in 2014to GEL 2.6 million in 2015. In 2013, they had received GEL 3.1 million, according to lings with the GNCC. 73

72http://netgazeti.ge/technology/106212/73 http://analytics.gncc.ge

Revenues of local TV stations

Ad revenues include income from advertising, sponsorship and announcements, as reported to the GNCC

(in GEL)

Ad rev2013

Total2013

Ad rev2014

Total2014

Ad rev2015

Total2015

Total 2m 2.9m 2.5m 3.2m 1.9m 2.5m

Telearkhi 25 603.3k 930k 526.2k 794.4k 555k 726k

Rioni 225.5k 333.7k 302.4k 412.5k 194k 300.9k

Kvemo Kartli TV 190k 199.4k 280.6k 296.4k 234.2k 255.8k

Trialeti TV 200.4k 234.2k 324.5k 328.2k 168.1k 168.1kMega TV 28.1k 47.8k 71k 174.4k 75.5k 146.1k

Odishi 281.2k 319.8k 217.1k 217.1k 129.6k 129.6k

Marneuli TV 41.8k 116k 70.1k 118.7k 61.8k 117.2k

Gurni 59.5k 151.4k 101.3k 114.3k 100.9k 102.8k

Argo 28.4k 61.3k 16.3k 61.8k 5.1k 81.5k

Imervizia 36.5k 74.2k 35.1k 72.2k 39k 81.3k

Metskhre Talga 39.3k 59.7k 68.8k 68.8k 65k 66.2k

Egrisi 56.2k 72.1k 101.5k 101.5k 48k 48k

Imperia 62.3k 96.3k 63.5k 84.7k 34.9k 46.1k

Borjomi TV 18.1k 41.2k 39.9k 57.2k 26.7k 43.1k

Tanamgzavri 42k 43.3k 75.2k 85.3k 32.4k 39k

Zari 63.4k 65k 66.5k 66.5k 37.6k 37.6k

TV ERA 9.3k 9.3k 23.1k 23.1k 32k 32k

Guria 32.4k 45.1k 38.3k 53.3k 22k 28k

Dia 1.1k 4.8k 18k 20.4k 13.1k 20.8k

Ekomi 27.7k 40.9k 32.9k 32.9k 3.9k 11.9k

Inpormatsiuli Uzrunvelkos Tsentri Jikha 0 0 0 0 4.3k 4.3k

Kvetenadze and Kompania 1.6k 4k 3.6k 4.4k 2.4k 2.4k

Source:Georgian National Communications Commission

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It appears that more restrictive advertising regulation which reduced the available advertising inventory did

not result in a redistribution of advertising spending towards small broadcasters, as some representatives ofregional broadcasters had hoped. Reported revenues of regional broadcasters from advertising includingminor revenues from sponsoring and airing announcements increased from GEL 2.1 million in 2013 to GEL2.5 million in 2014 but fell to GEL 1.9 million in 2015.

Due to the transition from analog to digital terrestrial broadcasting, several TV channels faced technical prob-lems. This also resulted in losses in advertising revenues, where local businesses did not buy commercials they

had otherwise placed, according to Natia Kuprashvili, the Chairwoman of the Georgian Association of RegionalBroadcasters (GARB), which represents 21 local TV channels.

The lack of reliable data about their audiences remains a challenge for local channels, Kuprashvili says. Both TAMcompanies, Tri Media Intelligence, and TVMR GE, have people meters installed in urban households. Kuprashvilisays that audience data from urban areas would do more harm than good for local TV channels as it would notappropriately depict the number of viewers of those stations that are broadcasting in rural communities.

According to Kuprashvili, regional broadcasters are seeking to establish an Industry Council and are consideringplans to set up their own audience measurement mechanism with a methodology that would reect the needsof GARBs members. If and how such a data collection effort could be sustainably nanced, remains unclear.

When the economic environment became more difcult in 2015, some advertisers focused their resources onnational TV and the rst thing they cut was spending to local media, Kuprashvili says.

Levan Aleksishvili estimates that some USD 10 million in TV commercials are sold without GRP in Georgiaand describes this amount as the potential pool of funds regional media outlets can compete for. Aleksishviliis the director of Gurjaani TV and over the past years has built Region Media Market, a sales house that helpsadvertisers in targeting audiences through regional TV, radio, print and online media. Aleksishvili has non-ex-clusive sales agreements with regional media outlets and says that his company accounts for up to half of

all their advertising sales, whereby some 80 percent of his companys sales are of TV commercials. With theexception of a micro-credit company, only Georgian companies who do not require GRPs advertise on regionalbroadcasters. He lists banks, pharmacies, breweries and businesses selling agricultural goods and equipment

as major advertisers.

Aleksishvili suggests that the lack of donor support and the challenging environment for commercial revenuesmight tempt some broadcasters to accept money to air pro-Russian content. Meanwhile, local government bodiesremain an important source of funding for regional broadcasters. Several municipalities pay for the transmissionof council meetings and speeches of local ofcials, as well as for other announcements and advertisements(see the section on questionable government advertising in this report).

The absence of major elections in 2015 may also be a reason for the decrease in revenues of local TV stations.In 2014, the year of the last local elections, political ads accounted for almost half of all her members advertisingrevenues, Kuprashvili told TI Georgia. Around the October 2016 parliamentary elections, she expects signicantincome from advertising by political parties and candidates.

Online advertising appears to see some steady growth but advertising spending remains small in absolute

terms. This impression emerges from several interviews with marketing executives. However, solid numbers ofonline advertising spending are hard to come by. Educated guesses put the overall online advertising spendingat GEL 7 to 8 million (approx. USD 3 to 3.5 million).

ONLINE

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There is currently no industry council to measure and compare usage of Georgian websites. Advertisers appearto rely on trafc data collected by the operators of websites and on code embedded in their ads. However, thereis no demographic data available that would allow advertisers to target online advertising to specic audiences.

Alexa.com lists Facebook, YouTube, Google and Odnoklassniki as the most popular websites in Georgia. Nolocal website with news or editorial content makes the top 25 most popular websites.78

The most visited Georgian website listed by Alexa is the streaming portal myvideo.ge. A company representativetold TI Georgia that the largest advertisers are online casinos, banks and telecom operators, with total advertisingrevenues of between of GEL 1.2 and 1.8 million, and described the unstable economic situation as the biggestchallenge to the online advertising market.

In recent months, some small and medium-sized advertisers were crowded out of the television advertising market,

according to several advertising executives TI Georgia spoke it. After prices for national TV commercials roseand sponsorship rules no longer allow to encourage purchases of products, some companies are no longerable to reach larger audiences through national TV. The logical move would be to instead focus primarily on onlineadvertising, one advertising agency executive told TI Georgia. However, several online media outlets TI Georgiaspoke with say they have not experienced a noticeable increase in demand.

It is possible that a shift of some advertisers away from TV and towards online advertising will mostly benetnon-Georgian companies, and primarily Facebook.79

FacebookA substantial share of Georgias online advertising spending goes to Facebook how much exactly is unknown:the company does not release any information about its revenues by country.

Facebook states a potential reach of 1.9 million people age 13 years and older within Georgia. A bidding pricesuggested by Facebook for very broadly targeted ads start at 0.1 USD for one thousand displays of an ad (CPM).

Georgian online media outlets and content providers thus have to compete with a service that has a very highreach and offers very competitive prices, resulting in already scarce resources for online journalism and othercontent leaving the country.

Facebook also offers another, although possibly not a decisive advantage: Because the contract partner is located

outside Georgia users in Georgia engage with Facebook Ireland Limited advertisers effectively dont haveto pay value added tax for Facebook advertising. The companies that place advertisements have to show VATpayable on their Facebook or Google ads on their books, but do not actually pay VAT.

Internet usage of Georgians

in % of the total adult population

Facebook Odnoklassniki Twitter Vkontakte Look for news& informationoutside socialmedia

Listen/watchMovies, Videos,Music

Capital 53% 17% 3% 5% 35% 24%

Urban 35% 25% 4% 9% 12% 5%

Rural 20% 19% 1% 3% 11% 4%

78http://www.alexa.com/topsites/countries/GE79Survey by CRRC for TI Georgia, conducted 24 April to 7 May

advertising market report 2016 eng

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